Peru signs 13 new exploration contracts with IOCs

Eric WatkinsOGJ Oil Diplomacy Editor

LOS ANGELES, Apr. 20 -- Peru's state-owned Perupetro, recovering from earlier scandals connected with the awarding of exploration licenses, has signed 13 new contracts valued at $650 million with international oil companies.

"With these 13 contracts we now have in effect a total of 92 oil contracts," a situation that shows "the confidence" that investors have in the country, said Peru's President Alan Garcia during the signing ceremony at Government Palace in Lima.

Recently appointed Energy and Mines Minister Pedro Sanchez expressed optimism over the awards, saying they would help transform the country's oil and gas industry. "For many years, Peru has been a net importer," he said. "We [now] will become net exporters."

Under terms of the new contracts, the companies will drill 35 oil wells during the exploration phase. If commercial volumes of hydrocarbons are discovered, the average royalty rate to be paid to the government will be more than 30%.

Meanwhile, Peruvian officials said an auction for an additional 12 lots for oil and gas will be held in July.

"I'd like to take this opportunity ... to announce the start of the 2009 selection process, which will officially begin in July and include 12 or 13 lots that may contain petroleum," said Perupetro Pres. Daniel Saba.

The auction will be Peru's first since last year, when several top government officials were fired or forced to resign after being accused of steering concessions to favored bidders.

At the time, Peru's former mines and energy minister, Juan Valdivia resigned, while Perupetro board member Alberto Quimper and Perupetro Pres. Cesar Gutierrez were fired.

The scandal was exposed when an audio tape surfaced on an investigative television news show that included a conversation between Quimper and Romulo Leon, a prominent member of President Garcia's APRA party, in which they apparently agreed to favor Discover Petroleum of Norway in a round of energy auctions.

The Norwegian company, which partnered with Petroperu, was later awarded five blocks: four of them off the country's central Pacific coast and the fifth onshore near Peru's borders with Brazil and Bolivia.

Peru's justice ministry said it would investigate the banking records of the Peruvian executives and suspend the contracts awarded to Discover.